Municipals were narrowly mixed Tuesday as U.S. Treasury yields fell and equities ended mixed.
The two-year muni-UST ratio Tuesday was at 59%, the five-year at 63%, the 10-year at 76% and the 30-year at 94%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 59%, the five-year at 63%, the 10-year at 73% and the 30-year at 93% at a 4 p.m. read.
The muni bond market remains strong, supported by Treasury market strength, said Anders S. Persson, Nuveen's chief investment officer for global fixed income, and Daniel J. Close, Nuveen's head of municipals.
Amid heightened issuance, around $55 billion in August reinvestment flows are entering the market, they said.
The muni market should perform well this week, as the new issue calendar falls to an estimated $6.2 billion, said Daryl Clements, portfolio manager at AllianceBernstein.
"It would be nice to add some additional positive performance as we head into September, which can be a difficult performance month in the muni market," he said.
This is an important week for muni market action, said Matt Fabian, a partner at Municipal Market Analytics.
"Over the last three months, municipal prices have leveraged large seasonal reinvestment — including $40 billion of tax-exempt maturities in August alone — to help manage otherwise considerable potential volatility via high supply, thin crossover/institutional demand, and outsize headline risks from the taxable market/Washington," he said.
The yield curve has still steepened "sharply," but wider credit spreads have not resulted from wider term spreads, Fabian said.
Reinvestment is expected to be smaller from here on out, falling to around $20 billion of tax-exempt maturities in September and then dropping more or less every month until June 2026, he said.
While issuance falls this week, supply should continue at an elevated pace, Fabian said.
Issuance is at $366.3 billion year-to-date, according to LSEG, an encouraging sign that issuance may fall between $575 billion and $600 billion this year, he said.
Non-exchange-traded fund flows have "softened" lately, potentially because of two recent inflation prints, Fabian said.
Meanwhile, separately managed account inflows "have swelled, with big (375,000) recent weekly trade counts that have driven down average weekly trade sizes; the retail demand component remains intact," he said.
While there has been no contagion effect, the Brightline situation has impacted high-yield indices and thus high-yield demand, with the potential for more news on the horizon, Fabian said.
Additionally, he said the Atlantic hurricane season has begun.
"Reasonably, all of the above argue for incremental pressure on longer maturities and on lower-rated borrowers generally; the currently cheap and steep curve seems unlikely to be going away," Fabian said.
And if this week's Federal Open Market Committee meeting minutes and/or related data releases in the near-term suggest no or fewer than expected rate cuts in 2025, pre-Fed-oriented front-end demand could weaken too, he said.
"Still, this is not a scenario that should unduly trouble municipal participants: 1) majority demand from (ostensibly income-based, laddered) SMAs [year-to-date] suggests continued buying interest even if total return stays negative; more demand could follow higher yields; and 2) actual credit deterioration (i.e., impairments) has been minimal among safe sectors despite elevated/rising threats," he said.
In the primary market, Piper Sandler priced for Garland, Texas, (/AA+/AA+/) $130.85 million of taxable GO pension bonds at par: 4.154s of 2/2026, 4.127s of 2030, 4.9s of 2035, 5.34s of 2040 and 5.67s of 2045, callable 2/2035.
Barclays priced for the Maine State Housing Authority (Aa1/AA+//) $125 million of social mortgage purchase bonds, Series 2025C, at par: 2.9s of 11/2027, 3.25s of 2030, 4.85s of 2040, 5.1s of 2045, 5.15s of 2050 and 5.25s of 2055, callable 5/15/2033.
Wells Fargo priced for the Mississippi Home Corp. (Aa1///) $100 million of non-AMT single-family mortgage revenue bonds, Series 2025C, at par: 2.85s of 6/2028, 3.1s of 6/2030, 3.2s of 12/2030, 4.1s of 6/2035, 4.15s of 12/2035, 4.875s of 12/2040, 5.125s of 12/2045 and 5.2s of 12/2050, callable 6/2033.
In the competitive market, Madison, Wisconsin, (Aaa///) sold $130.065 million of GO promissory notes, Series 2025D, to Wells Fargo, with 5s of 10/2026 at 2.25%, 5s of 2030 at 2.50%, 5s of 2035 at 3.37%, 4.25s of 2041 at 4.30% and 4.625s of 2044 at par, callable 10/1/2034.
AAA scales
MMD's scale was bumped up to three basis points: The one-year was at 2.20% (-3) and 2.22% (-3) in two years. The five-year was at 2.39% (-2), the 10-year at 3.25% (-1) and the 30-year at 4.63% (unch) at 3 p.m.
The ICE AAA yield curve was cut up to one basis point: 2.24% (+1) in 2026 and 2.23% (+1) in 2027. The five-year was at 2.42% (unch), the 10-year was at 3.18% (unch) and the 30-year was at 4.60% (+1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped up to two basis points: The one-year was at 2.20% (-2) in 2025 and 2.22% (-2) in 2026. The five-year was at 2.38% (-2), the 10-year was at 3.24% (-2) and the 30-year yield was at 4.62% (unch) at 4 p.m.
Bloomberg BVAL was narrowly mixed: 2.20% (-2) in 2025 and 2.22% (-2) in 2026. The five-year at 2.38% (-1), the 10-year at 3.21% (+1) and the 30-year at 4.60% (unch) at 4 p.m.
Treasuries were slightly firmer.
The two-year UST was yielding 3.75% (-2), the three-year was at 3.707% (-2), the five-year at 3.82% (-3), the 10-year at 4.301% (-3), the 20-year at 4.881% (-3) and the 30-year at 4.902% (-3) near the close.
Primary to come
The New York City Transitional Finance Authority (Aa2/AA/AA/) is set to price Wednesday $1.388 billion of building aid revenue bonds, consisting of $868.09 million of Fiscal 2026 Series S-1, $500.61 million of Fiscal 2026 Series S-2, and $19.02 million of Fiscal 2026 Series S-3. RBC Capital Markets.
The Los Angeles County Public Works Financing Authority (/AA+/AA+/) is set to price Wednesday $826.315 million of lease revenue bonds, Series 2025J. BofA Securities.
The Capital Trust Authority is set to price $149.96 million of unrated senior living facilities revenue bonds (Grand Villa Portfolio Project), consisting of $143.18 million of Series 2025A and $6.78 million of Series 2025T. Mesirow Financial.
The Port Arthur Independent School District, Texas, (Aaa///) is set to price Thursday $147.2 million of PSF-insured unlimited tax school building bonds. SAMCO Capital Markets.
The Montana Facility Finance Authority (//A+/) is set to price Thursday $113.4 million of revenue bonds (Benefis Health System Obligated Group), consisting of $63.4 million of Series 2025A and $50 million of Series 2025B. Barclays Capital.
Competitive:
The Louisville/Jefferson County Metro Government Board of Water Works (Aaa/AAA//) is set to sell $231.05 million of water system revenue bonds at 11 a.m. Eastern Thursday.
Minneapolis, Minnesota, (Aaa/AAA/AAA/) is set to sell
